Published: Sat, December 15, 2018
Markets | By Otis Pena

Tencent Music raises almost $1.1 billion in US IPO

Tencent Music raises almost $1.1 billion in US IPO

Tencent Music Entertainment Group climbed in its US trading debut Wednesday after pricing its initial public offering at the bottom of a marketed range.

And despite an uncertain market and continuing trade tensions between the United States and China, Tencent Music's IPO acts as a positive beacon for newer tech companies looking at making it big.

The company's shares opened at $14.15, 8.8 percent above their initial public offering price of $13 per ADRs, giving it a market capitalisation of about $23 billion (18.34 billion pounds) - at par with Swedish peer Spotify Technology's SPOT.N current valuation. The company said it planned to use the IPO proceeds to "enhance our music content offerings to improve the variety, quality and quantity of content on our platform: and to help grow its base".

Tencent Music's IPO finish off a guard year for USA postings by Chinese organizations, with $7.9 billion raised before Tencent Music's presentation, Refinitiv information appeared.

The filing said the company had achieved "growth and profitability at scale" with revenue of $1.9 billion in the first nine months of the year and a profit of $474 million. Tencent Music opted to price lower after initially guiding fund managers that orders were coming in around the midpoint of the marketed range. That is the highest amount since 2014, the year of Alibaba Group Holding Ltd's record US$25 billion IPO. Tencent Music was spun out of Tencent, the internet giant that is Asia's most valuable company. Biotech company Moderna Inc, which debuted last week, priced toward the lower end of its range on a day when the wider stock market fell on renewed trade concerns.

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Tencent Music is the largest online music platform in China, boasting over 800 million active users monthly and expanding along with streaming apps such as Kuwo, QQMusic, KuGou, and even the karaoke app We Sing.

It finally launched its hotly-anticipated IPO a day after USA and Chinese leaders brokered a 90-day truce in their trade conflict last week.

Tencent Music, of course, owns China's market-leading streaming service QQ Music, and has a number of other digital, distribution and label operations too.

This comes despite reports claiming this week that a Tencent executive had been sued around an accusation of defrauding and coercing an early investor to sell his equity stake, ahead of the company's IPO. Tencent Music has two share classes, Class A and Class B, and each ADS represents one Class A share. By comparison, Spotify, its dominant counterpart in the USA, lost a net $520 million.

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